Soybean Farming Outlook 2010/11 Presentation at the JP Morgan Latam Agribusiness Conference in São Paulo - Sep, 2010.

1. Soybean Logistics in Brazil
September, 2010

2. • Mato Grosso Soybean and Corn Growers Association
• Founded in February 2005
• 5000 Growers in 18 Districts
• Farmers pay compulsory checkoff of US$ 1 per hectare
• Founder of Aprosoja Brasil, ARES, Instituto Ação Verde
• International partnerships with soybean associations
• Main goal is to increase competitiveness of Mato Grosso
corn and soybean farmers.
Aprosoja

3. Source: Anuário Exame 2008
Main Problems of Brazilian Agribusiness – Exame Magazine Survey
Importance of Logistics in Agribusiness

4. Margem
MT - N -24,8%
MT - C -21,6%
MT - NE -20,2%
MT - S -12,4%
MS - S -9,1%
BA -5,6%
MS - N -3,1%
GO -2,7%
MG -2,7%
TO -1,9%
MA 0,8%
PI 1,6%
PR 3,0%
SP 3,8%
DF 6,5%
RS 6,8%
SC 8,7%
Margem
MT - N -24,8%
MT - C -21,6%
MT - NE -20,2%
MT - S -12,4%
MS - S -9,1%
BA -5,6%
MS - N -3,1%
GO -2,7%
MG -2,7%
TO -1,9%
MA 0,8%
PI 1,6%
PR 3,0%
SP 3,8%
DF 6,5%
RS 6,8%
SC 8,7%
HIGHERCOSTS
 Basis range from U$
0,5 to U$ 2,7/bu +/-
Port Basis
US$ 100/ Ton
US$ 20/ Ton
Source: Céleres / Aprosoja
16%
36%
25%
8%
5%
5%
2%
Soybean Production in Brazil – Logistics Costs

5. Why Transportation Costs are Important to Farmers
FOB SANTOS: US$ 448/ton
= Price to Farmer: US$ 302/ton @ 1.72 FX
(-)Port Costs: R$ 20,00/ton
(-)Transport Costs: R$ 215,00/ton
(-) Origination Costs: R$ 16,00/ton
-------------------------------------------------------
Source: Aprosoja
Sorriso,
Mato Grosso
Santos Port
= Price to Farmer: US$ 316/ton @ 1.90 FX + 4,6%

6. Source: Centrograos, Caramuru and Soy Transport Coalition, Aug.2010
Shangay, China
Santos, Brazil
New Orleans,
USA
Sorriso, Mato
Grosso
Illinois, USA
Transportation Costs Benchmarking
Barge
US$ 25/Ton
Road
US$ 125/Ton
US$ 46/Ton
US$ 45/Ton
Brazilian Logistics costs +139%

7. Deficient Port System
Soybean Transportation Problems - Brazil
Construction of New Roads
High Rail Costs
High share of road in the transport mix
Lack of storage

8. Problem 1 Strategies
• BR 163 from Mato Grosso to Santarém (Pará)
• BR 158 from Mato Grosso to Pará state
• BR 242 connecting East and West Mato Grosso
• BR 080 from Mato Grosso to Goiás State
Construction of
New Roads
Main roads in construction or projects
Source: Cargill, 2010
Transportation Problem # 1
BR 163
BR 158
BR 242

9. Source: Cargill, 2010
Transportation Problems BR 163

10. “Redneck” Public-Private Partnerships
Lucas-Tapurah Road (96km) in 2002 Lucas-Tapurah Road (96km) now
Numbers of the “Redneck” partnerships
Soybean farmers and the State Government built more than 2.000 km in the state of
Mato Grosso through these partnerships.
Source: Aprosoja/ SINFRA-MT

11. Transportation Cost Reductions with BR 163
Sorriso – A. Araguaia, MT
835 km
Alto Araguaia - Santos, SP
1.100 km
Source: Aprosoja
Total: 1.935 km
Route Ferronorte
Sorriso – Santarém, PA
1.344 km
Total: 1.344 km
Cost Reduction: US$ 30/Ton
Route BR 163

12. Problem 2 Strategies
• Expansion of the mesh
• Elimination of bottlenecks of the current railroad mesh
• Stimulate competition through change in regulatory framework
High Rail Costs
Rail Rates (US$ per 1.000 tku)
Source: Cargill, 2010
US$ 20
USA
US$ 41
BRAZIL
Transportation Problem # 2

13. Source: USDA (1) Memphis
Land Use in BrazilLand Use in Brazil Infrastructure Problems
Rail Analysis
Source: ANTF
Domain Strip Invasion Santos Port Access Level Crossings
Improvement of the Regulatory Framework
• Separate the infrastructure concession from the transportation and freight services;
• Allow two or more transport service providers to use the same infrastructure;
• Increase the number of transport service providers;
• Increase access to the rail infrastructure – isonomy;
• Stimulate competition in the transport of goods;
Source: ANTT

14. Problem 3 Strategies
• Development of waterways (Teles Pires-Tapajós and Tocantins-
Araguaia)
• Improvement of Tiete River Waterway
• Expansion of the rail mesh
High share of road
in the transport mix
Rail Rates per 1.000 tku
Source: ABIOVE
Transportation Problem # 3

15. Source: ANTF / COPPE
Railways
Ports
System
Transportation System Benchmark

16. Source: Aprosoja
Rondonopolis
East-West RR
Midwest Railroad
North-South Railroad
Ferronorte Railroad
Expansion Projects of the Rail Mesh
Source: Ministério dos Transportes, IBGE, ANTF and CIA Factbook.

17. Transportation Cost Reduction Alternative - Waterway
Sorriso – A. Araguaia, MT
835 km
Alto Araguaia - Santos, SP
1.100 km
Source: Aprosoja
Total: 1.935 km
Route Ferronorte
Sorriso – Cachoeira Rasteira, MT
715 km
Total: 1.758 km
Cost Reduction: US$ 50/Ton
Route Teles Pires-Tapajós Waterway
Cachoeira Rasteira – Santarém-PA
1.043km

18. Source: Cargill
Santarém- PA
Porto Velho - RO
2 Ports
7 Storage Facilities
43 Barges, 5 Towboats, 2 “Bull Truster”
(Transportes BERTOLINI)
650 Trucks
Case of Success: Madeira River
Cost Reduction: R$ 70,00/Ton

19. Problem 4 Strategies
• Solution of the debt problem – credit
• Tax incentives for grain handling and storing
• Low interest rate credit lines for the construction of grain storage
facilities
Lack of storage
Grain storage problem in Brazil (all grains and oilseeds)
155,3
126,1
186,4
60,26
0,0
50,0
100,0
150,0
200,0
Production* StorageCapacity OptimumCapacity StorageDeficit
MMT
BrazilianGrainStorage
Source: Conab, Anut and Aprosoja / * Soybean, corn, rice, weat, sugar and coffe, 2007
Transportation Problem # 4

20. Problem 5 Strategies
• Development of the Northern Ports (environment permits)
• Bureaucracy in the concessions (e.g. TEGRAM)
• Poor truck access and rail infrastructure
• Slow dregging in main ports
Deficient Ports
System
Brazil International Agricultural Trade Forecast (milion Tons)
Exports
(* Agricultural Procucts)
Imports
(Fertilizers + Wheat)
Source/ Projection: ANUT (2008)
* Agricultural Products: Soybean complex, corn, coffee, sugar, ethanol, pulp, meats
Transportation Problem # 5
+ 105%221
108

21. Brazil’s Northern Ports
Exports by Port (2009)
Source: Aprosoja
15%

22. Problems Strategies
Deficient Ports
System
Summary
Construction of
New Roads
High Rail Costs
High share of road
in the transport mix
Lack of storage
• BR 163 from Mato Grosso to Santarém (Pará)
• BR 158 from Mato Grosso to Pará state
• BR 242 connecting East and West Mato Grosso
• BR 080 from Mato Grosso to Goiás State
• Expansion of the mesh
• Elimination of bottlenecks of the current railroad mesh
• Stimulate competition through change in regulatory framework
• Development of waterways (Teles Pires-Tapajós and Tocantins-
Araguaia)
• Improvement of Tietê River Waterway
• Expansion of the rail mesh
• Solution of the debt problem – credit
• Tax incentives for grain handling and storing
• Low interest rate credit lines for the construction of grain storage
facilities
• Development of the Northern Ports (environment permits)
• Bureaucracy in the concessions (e.g. Tegram)
• Poor truck access and rail infrastructure
• Slow dregging in main ports

23. Cattle Productivity:
36 Kg / hectare
Soy + Corn
8.000 Kg / hectare
Low Productivity pastures could be converted into
Soybeans with better logistics
170 Million hectares
Source: IMEA

24. Water
Land
Source: FAO (2000); FAO (2007). Elaboration: ICONE
Brazil: Potential to be the Agricultural Superpower

25. Marcelo Duarte Monteiro
CEO
marcelo@aprosoja.com.br